Bits, short for binary digits, are the smallest units of data in computing and digital communications. Each bit can represent a value of either 0 or 1, which forms the foundation of all digital information. By combining multiple bits, computers can represent more complex data, such as numbers, letters, and images. In digital systems, bits are often grouped into larger units called bytes, where one byte consists of eight bits. This grouping allows for the representation of 256 different values, making it essential for encoding characters in systems like ASCII and UTF-8. Understanding bits is crucial for grasping how computers process and store information.